Adopting 580e, changes to California State Law SB 931, which take affect January 2011, reinforces current anti-deficiency laws under Code of Civil Procedure (CCP) 580b and 580d.
The bill, SB 931, adds a significant provision to the California anti-deficiency laws which protect California borrowers from deficiency liability on real estate secured obligations. The purpose of SB 931 is to facilitate short sales of distressed residential property and avoid the burdens of foreclosure sales while preserving for the borrower the anti-deficiency protections that are already set forth in Code of Civil Procedure (CCP) Sections 580b and 580d.
SB 931 adopts new CCP 580e which ensures that no judgment shall be rendered for any deficiency on a note secured by a first deed of trust encumbering a dwelling of not more than four units in any situation where the trustor sells the dwelling for less than the remaining balance of the secured indebtedness due at the time of sale, if the beneficiary under the first deed of trust consents to the sale in writing. The beneficiary’s written consent to the sale will obligate the beneficiary to accept the sale proceeds as full payment of the secured obligation.
You can read the new bill, SB 931, by clicking here.
The intent of SB 931 is to protect a homeowners in connection with a short sale on their residence. California homeowners pursuing short sales on their first mortgage will no longer need to worry about their lender seeking a deficiency judgment after a short sale.
Bill SB 931 is not intended to protect an entity or an individual borrowing on a commercial loan secured by one or more consumer residences, which would be a case where an individual or limited liability company or partnership is a borrower on a construction loan to build residential units.
Some concerns have been raised that CCP 580e could provide protection for a real estate developer following consensual sales of new residences for less than the outstanding balance of the construction loan, as CCP 580e is not limited in its protection of homeowners, nor does it require that the residential property be occupied by the homeowner, nor limit the residential property to only one building (of 1-4 units).
The bottom line is that before bill SB 931 was added, homeowners received more deficiency protection when opting for foreclosure instead of a short sale.
This bill will now provide the homeowner by providing the same deficiency protections as a short sale.
If you have questions about bill SB 931 or Short Sales in Long Beach, CA, feel free to contact me @ 562-364-9505 or mark@shandrowgroup.com
One Less Foreclosure.
Sincerely,
Mark Shandrow
Real Estate Broker
office 562-364-9505 ext 100
mark@shandrowgroup.com
Shandrow Group
3970 Atlantic Ave., 210
Long Beach, CAÂ 90807
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